BUSINESS VALUE GUIDE VOLUME 5 COGNOS PLAN-TO-PERFORM BLUEPRINTS HEADCOUNT & COMPENSATION PLANNING

Transcription

1 BUSINESS VALUE GUIDE VOLUME 5 COGNOS -TO-PERFORM BLUEPRINTS & NING

2 Headcount and Compensation Planning helps corporations manage cross-enterprise employee headcount, compensation, and benefit costs to align departmental decisions with corporate objectives. MARKETING FINANCE SALES Employee-related costs often comprise the greatest share of corporate operating expenses. It is no surprise that executive management focuses on controlling employee expenses in every way possible. At divisional and departmental levels, however, managers must make hiring and compensation decisions that will help their units meet objectives: hiring the right people for the right jobs, compensating them fairly, helping them become rapidly productive, and retaining them as long as possible. PRODUCTION & DISTRIBUTION EXECUTIVE MANAGEMENT PURCHASING Human Resources () administers the headcount and compensation planning process. It makes sure managers adhere to corporate hiring and compensation policies. seeks forward visibility to hiring decisions so that it can source the best talent. It analyzes employee trends like attrition so that the corporation can make decisions to help retain top talent. Consequently, executive management, finance, and are looking for tools and disciplines to manage headcount and compensation planning so that business unit decisions are aligned with corporate objectives. CUSTOMER SERVICE TECHNOLOGY IT/R&D HUMAN RESOURCES 2 2

3 Headcount and Compensation is linked by business drivers to various process areas in a corporation. Enterprise headcount plans are dependent on a number of business drivers. For instance, sales forecast trends can have immediate impact on headcount in sales, marketing, and operations. Service KPI objectives can also affect headcount: If product failure rates are higher than expected, additional hotline support and on-site field service staff might be required. Resource planning for product development and production also directly impacts headcount. In turn, headcount can be a driver for operational plans in other functions. IT spending like the number of computers or networks to purchase and deploy is directly tied to headcount, which in turn drives IT helpdesk plans for staffing, infrastructure, and training. Employee compensation is a driver of employee productivity. Merit increases tied to individual, team, divisional, and corporate performance objectives can have a significant impact on enterprise performance. The key outputs of the process are headcount plans and compensation plans. SUPPORTING PROCESSES Sales forecasting Field service headcount planning Call center performance planning Call volume/service analytics Product development resource planning IT research planning Capacity planning Target setting Promotional planning AND NING OUTPUT SUPPORTED PROCESSES Integrated financials Expense planning Executive scorecarding 3

4 The process manages existing employee headcount, planning for new hires, fixed and variable compensation, and monitors performance. MANAGE EXISTING EMPLOYEE FOR NEW HIRE MANAGE MONITOR PERFORMANCE During annual operational planning, all activity centers develop plans that include headcount and compensation. During the year, updated forecasts are periodically created, providing an opportunity to revise headcount and compensation plans. The process typically starts by updating existing employee status. Some employees may take a leave of absence, transfer to other departments, and or be terminated. The next step is to update the new-hire headcount forecast based on current business conditions. With a total headcount picture in place, managers typically adjust their compensation plans. Annual salaries and quarterly, semi-annual, or annual bonuses are adjusted based on individual, team, divisional or corporate performance. Stock options or restricted stock may be granted as well. Update employee status (e.g. from active to leave of absence) Resolve any related intracompany transfers Plan new hires by position and office location Assign appropriate start dates and compensation targets Comply with policies on compensation Evaluate employee performance Assess corporate recommended compensation Make merit and bonus adjustments based on market conditions Award stock options and restricted stock based on performance Comply with corporate policies for merit, bonus, and stock pools Manager evaluates compensation plans against corporate guidelines evaluates new hire pipeline with increased visibility on planned need monitors key employee trends like attrition Departmental manager monitors total employeerelated expenses plans through expense planning and control During headcount and compensation planning, managers must comply with established policies. After forecasts have been updated and approved, various functions and departments will monitor employee-related performance. For instance, will monitor the new-hire pipeline to ensure it can provide the best candidates at the right time, and will monitor trends like attrition, so that executive management can work to enhance employee productivity. 4 4

5 A typical workflow supporting Headcount and Compensation Planning. Department ESTABLISH TARGETS APPROVE Revised Expense Plan REVISE Headcount and Compensation Planning is a collaborative effort to align departmental staffing requirements with corporate objectives: Corporate management typically tries to control headcountrelated expenses, while divisional managers try to make headcount and compensation decisions that optimize departmental efficiency and productivity. ensures compliance with corporate policies. As they update existing employee status, staff managers must be aware of leave-of-absence, interdepartmental transfer, and severance policies. After adjusting the status of existing employees, staff managers update new-hire plans. Business conditions may dictate an increase or decrease in headcount projections or a shift in new-hire timing. Finance MODEL DISTRIBUTE CONSOLIDATE VALIDATE AGAINST Ensure compliance with compensation policies Review updated new-hire forecast Compensation planning typically occurs annually for salaries, and more frequently (perhaps quarterly) for variable compensation like bonuses and other incentives such as stock option grants. REVIEW Headcount and compensation expenses are consolidated across the enterprise through the corporate expense planning and control process. Staff EXISTING EMPLOYEE STATUS NEW HIRE 5 5

6 Most companies plan using M systems and spreadsheets, resulting in error, delay, and difficulty in aligning divisional headcount and compensation decisions with corporate financial objectives. Department ESTABLISH TARGETS APPROVE Total headcount expense forecast is a gross average. It is not tied to individual employee information. It is not linked to business drivers such as revenue or customer service KPIs. Reduces accuracy and leads to divergent plans across the corporation. Takes months to synchronize total headcount and compensation plan with overall Expense Plan. REVISE Human Resource Management (M) systems are useful for managing current and historical employee information in a secure, scalable manner, but not so useful for managing forward-looking employee information: How many new hires will departments plan to hire over the next 12 months by role, grade, and compensation rate? This is typically handled with a separate manual spreadsheet process, leading to slow, disconnected, and error-prone planning. Outside the annual operating plan cycle, it is difficult to update enterprise-wide headcount forecasts. If revenue projections run ahead of the annual plan, for example, headcount in sales and customer service should increase proportionally. But without links to headcount drivers, such proportional incease likely won t occur. has little visibility into updated new-hire forecasts, which limits its ability to manage the new candidate pipeline. Consequently, the best candidates are not necessarily available when really needed. And if has no early visibility into employee attrition trends, executive management will lack information for taking corrective action. Compensation expense forecasts are gross averages, and not tied to individual employee headcount plans, so corporate expense plans are inaccurate and take months to create. 6 Finance Staff MODEL Manual, spreadsheet-based models, disconnected across hierarchical organizations, lead to error and difficulty in coordinating and synchronizing financial plans with operational plans. has little visibility to updated new-hire forecast across the corporation, reducing ability to manage candidate pipeline effectively. No early visibility into attrition trends. EXISTING EMPLOYEE STATUS DISTRIBUTE REVIEW NEW HIRE CONSOLIDATE VALIDATE AGAINST Total compensation cost forecast is a gross average based on headcount, and not by individual employee. Reduces plan accuracy. Difficult to update full corporate headcount forecast outside of the annual operating plan cycle. No linkage to headcount drivers like revenue trends or customer service KPIs.

7 High-performance companies replace manual spreadsheet process with robust multidimensional modeling and integrated workflows to help reduce errors, improve control, and boost accountability Department ESTABLISH TARGETS APPROVE Revised headcount forecasts are coordinated with the monthly corporate expense forecast. Changes in business drivers are synchronized with headcount forecasts. Takes two weeks to synchronize total headcount and compensation plan with overall expense plan. REVISE With Cognos Planning, staff managers are able to update existing employee status information as changes occur: An employee takes a leave-of-absence; another is transferred to a new department; another is recruited by a competitor. Staff managers area able to quickly update new-hire headcount forecasts based on real business events, like changes in customer service KPIs to warrant additional hotline or on-site field support headcount. During compensation planning cycles, staff managers update compensation expense forecasts tied to actual existing employee changes as well as new hires, so finance doesn t have to settle for gross averages when determining headcount expenses. Finance MODEL Robust, multi-dimensional modeling capabilities replace spreadsheet process with integrated workflows to reduce errors, improve control, boost accountability, and help synchronize financial and operational plans. DISTRIBUTE REVIEW CONSOLIDATE VALIDATE AGAINST has immediate visibility to updated new hire forecast across the corporation as changes take place, increasing ability to manage candidate pipeline effectively. has immediate visibility into employee attrition trends and can make recommendations to senior management for corrective action. has immediate visibility into updated new-hire forecasts as changes take place and can now manage the new-hire pipeline more effectively. Revised total headcount expense forecasts can be synchronized monthly with the corporate expense plan. Staff managers use businessdriver changes to update headcount forecast. Staff managers update total compensation forecast as changes occur at individual employee level. The whole process now takes only weeks, and results in accurate, reliable alignment of corporate expense plans with divisional headcount and compensation decisions. Staff EXISTING EMPLOYEE STATUS NEW HIRE 7

8 Headcount Expenses Revenue Plan The Headcount and Compensation Planning Blueprint enables an integrated process that aligns corporate financial objectives with divisional workforce decisions. Cognos Plan-to-Perform Blueprints are pre-configured solution building blocks that allow companies to jump start their implementations. Blueprints are pre-defined data models that encapsulate the collective best-practice knowledge from the Cognos Innovation Center for Performance Management and its leading customers in specific business process areas. In the hands of Cognos Implementation Services consultants, Cognos certified implementation partners, or experienced customers, Blueprints enable streamlined project implementation schedules and improve project success rates. The Headcount and Compensation Planning Blueprint enables companies to align corporate financial objectives with divisional workforce decisions. Linkages to business drivers in other planning areas like sales or customer service can be established to ensure proper alignment with headcount plans. Staff managers throughout the corporation can manage existing and new employees headcount from one integrated system. Salary, merit, and bonus decisions can be managed at the employee and/or group level. The complexity of fixed and variable compensation requirements can be managed for any industry across many countries. Pre-configured solution building blocks that: Pool collective best-practice knowledge Accelerate time-to-value Increase project success rate OPERATIONS, MARKETING, ETC. CAPITAL EXPENDITURE NING Capital Expenditure Depreciation Expense FINANCE Reports Income Statements Balance Sheet Cash Flow Financial Ratios STRATEGIC FINANCIAL NING AND FORECASTING Operating Expenses NING AND CONTROL Market Demand SALES SALES NING AND FORECASTING HUMAN RESOURCES AND NING 8

9 Cognos Plan-to-Perform Blueprint helps manage headcount and compensation decisions in a customer service department. A company is experiencing unexpected new product failures. The customer service manager confirms an increase in service call rates and requests that line managers pay special attention to relevant KPIs during monthly forecasting. Using these KPIs, managers see the need for additional service headcount during the next six months, and adjust employee plans: Several staff are temporarily transferred to hotline support and field service. Newhire plans are adjusted to increase headcount in the next quarter. Compensation plans are adjusted to reflect overtime required in the two months prior to new hires. Department Finance ESTABLISH TARGETS APPROVE Customer service department head confirms increased service call rate due to unexpected field failures on major new product line. She requests that line managers pay attention to key customer service KPIs during monthly forecasting. MODEL DISTRIBUTE CONSOLIDATE VALIDATE AGAINST Begins acting on Q2 new-hire plan. Operational headcount plans synchronized with expense plan in just weeks. REVISE has immediate visibility into the quarterly new hire plan and begins lining up the best candidates. Finally, finance synchronizes customer service headcount and compensation plans with overall corporate expense plans in mere weeks, leaving plenty of time for analysis. Staff Adjust existing employees to reflect customer service KPIs. Results in employee transfers into hotline support and on-site field support. REVIEW Staff Increase Q2 headcount. Staff Adjust overtime levels to support KPIs for next six months. Staff EXISTING EMPLOYEE STATUS NEW HIRE 9

10 10 The Headcount and Compensation Planning Blueprint is based on proven best practices from companies like Ceridian who implemented Cognos to improve its workforce planning process. Ceridian Corporation is an information services company focused on human resource, transportation, and retail markets. The company s human resource solutions enable customers to outsource employment processes such as recruitment and applicant screening, payroll, tax filing, human resource information systems, employee self-service time-and-labor management, and benefits administration. To operate more effectively and competitively, Ceridian launched an initiative to improve the infrastructure for management planning, budgeting, forecasting, and reporting. Key goals were to streamline processes, reduce budget cycles, and improve the ability to manage workforce productivity and overall costs. Ceridian uses Cognos Planning to help manage and allocate its workforce resources. The solution interfaces directly with Ceridian and financial systems. The end result is a single workforce management portal which helps staff managers align workforce decisions with corporate objectives. A leading information services company in the human resource, retail, and transportation markets Over 9,000 employees 2003 Revenue $1.3 billion BUSINESS CHALLENGES Difficulty in planning and forecasting enterprise labor costs accounting for 50 percent of operating expense structure Inability to proactively allocate staff resources to priority initiatives due to incomplete view of resource utilization and deployment SOLUTION APPROACH Implemented Cognos Planning to manage headcount planning and align workforce decisions with corporate objectives BUSINESS VALUE DERIVED Increased collaboration across geographies, business units, and corporate functions Increased level of insight and decision support Flexibility to model continuously changing business conditions Better visibility into operations one version of the truth for performance Proactive management of human capital COGNOS SOLUTION MAP FINANCE EXEC. MGMT. In a very short time we could project and identify which departments in the organization are growing. This is especially important because there are hundreds of departments in the organization. When we see labor costs rising, we can identify where in the organization it is happening and delve deeper into the situation to... determine the whys. DIRECTOR OF NING AND ANALYSIS Ceridian

11 About the Cognos Innovation Center The Cognos Innovation Center for Performance Management is dedicated to the understanding, adoption, and implementation of next-generation planning and performance management practices. It is a consortium of industry leaders, practitioners, thought leaders, forward-looking executives, and technology experts experienced in, and committed to, the advancement and successful application of technology-enabled performance management best practices. The Innovation Center seeks to assist organizations in optimizing the alignment of their plans, processes, and resources with corporate goals and strategies.